O'Neill's statements against the current moves by the Organisation for Economic Co-operation and Development to create a level playing field among offshore and onshore countries around the world.

"I am troubled by the underlying premise that low tax rates are somehow suspect and by the notion that any country, or group of countries, should interfere with any other country's decision about how to structure its own tax system,'' Mr. O'Neill said in an opinion piece in the Washington Times.

He described the work of the OECD, which is threatening sanctions on offshore centres that do not co-operate with its requirements, as "too broad and it is not in line with this administration's tax and economic priorities''.

He said: "The US will not participate in any initiative to harmonise world tax systems.'' Instead he called for building a framework to share "specific and limited information necessary for the prosecution of illegal activity''.

Former US President Bill Clinton's administration supported the OECD's project to curb use of offshore subsidiaries, bank accounts and other entities to avoid US taxation. The OECD aims to identify countries whose laws encourage so called "tax avoidance'' and to threaten them with sanctions and other punitive measures.

President George Bush has taken a different approach and aims to cut taxation by over $1 trillion over the next ten years. Mr. O'Neill said US policy abroad should mirror this aim to cut taxation.

He said the OECD's efforts should focus on co-operation and information exchange so that individuals and businesses that are evading tax can be caught and prosecuted. "The United States must make every effort on our own to obtain the necessary information to enforce US tax laws. We cannot tolerate those who cheat on their US taxes by hiding behind a cloak of secrecy,'' he said.

However, the Treasury secretary said there was a limit to that information exchange.

"We do -- and will -- guard against over-broad information exchanges in which foreign governments seek information for improper purposes or without proper safeguards,'' he said.

US, OECD clash over taxes The US has negotiated treaties with 60 countries to obtain information in cases of suspected tax evasion.

In 1986 a convention for mutual assistance was negotiated with Bermuda in relation to tax matters. This provides for exchange of specific limited information as per request from the US.

The OECD reacted to Mr. O'Neill's comments yesterday by saying that the assertion that the OECD was concerned about rates of taxation was "nonsense''.

Nick Bray, head of media relations at the OECD, said: "The OECD's project has nothing against low tax rates as such. This is a misrepresentation.'' However Frits Bolkenstein, the EU commissioner for taxation, said the OECD will continue with its initiative.

"We are not going to sit with our hands crossed and do nothing about these fortunes being stashed away in countries where nobody can look at them.'' Representatives of some offshore centres, meeting yesterday in the UK, expressed delight at the US Treasury comments.

Lynette Eastmond, from the Barbados government, said: "The position we see articulated (by the US) is essentially one that we've been saying all along.'' But Mr. Bolkenstein responded: "It would be a bad day for the United States, also for other jurisdictions and governments, but mostly for the United States,'' if it pulled out of the OECD initiative.

OECD row: Paul O'Neill